It may seem like you have more options but will you really make more money?

Accredited investors have access to financial products that regular investors don’t. On the surface, that seems like you have a lot more options, but can accredited investors really make more money? A lot of the time, the answer is no:

What is an accredited investor?

An accredited investor is anyone with a net worth of above S$2 million*, and a provable income of at least $300,000 over the past 12 months. Once the requirements are met, anyone can choose to register themselves as an accredited investor.

Accredited investors are assumed to be financially savvy. When dealing with these investors, financial institutions have less stringent requirements. For example, accredited investors can be sold unrated bonds, or complex investment products.

The typical argument for being an accredited investor is that you can optimise your wealth. High net-worth investors can take risks that retail investors cannot, and thus gain higher returns on their assets. But practically speaking, there may be more downsides than upsides. Here’s why:

*Property assets can only account for half the total net worth

Accredited investors get risky products pushed on them all the time

In 2016, oil and gas exploration company Swiber Holdings collapsed. Bond holders suffered significant losses, and this drew attention to the fact that most Swiber bonds – in fact most unrated bonds in general – were sold to accredited investors via private banks.

In the aftermath of the Swiber disaster, Bloomberg noted that private banks took up 49 to 92 percent of unrated notes by PT Tikomsel Oke, Pacific Andes, and Swiber Holdings, all of which were companies that defaulted. One cause was that bond issuers offered banks rebates of as high as one per cent, to sell these unrated securities.

(Companies save significant sums by not having their bonds rated, via credit ratings organisations such as Moody’s.)

While some private bankers may look for long term client relationships, others will see accredited investors as nothing more than immediate sales targets. Bear in mind that, if your private banker destroys your wealth, you won’t get back a single cent that you’ve paid in fees and commissions.

It’s a mistake to assume that accredited means savvy

Accredited investors are assumed to be financially savvy, but that isn’t always the case. Some people may have acquired their wealth without ever touching a single stock (e.g. celebrities, successful restauranteurs, app developers).

These people may qualify as accredited investors on paper, but they know no more about pricing models or emerging market bonds than the average Singaporean. Most of the time, these people end up believing almost anything a wealth manager tells them (see point 1).

If you could qualify to be an accredited investor, but you know you don’t really understand finance, then don’t register. Remain a retail investor, as it restricts your exposure to lower risk products.

Being an accredited investor doesn’t always mean your financial products will make you more money

The theory behind allowing accredited investors to buy high risk products is just higher returns. They can afford to risk more, and hence they can also gain more. But if you think this is a vague argument, you’re right.

We don’t know if being an accredited investor, and thus being allowed to buy risky products, means you’ll make more money. There are no statistics to show this. Even if there were, those statistics would apply to a collective whole – it may not apply to you as an individual.

The Singaporeans who bought Swiber bonds certainly haven’t made money and there’s nothing to suggest that reliable products, such as ETFs, can’t serve the wealthy the same way they do the public.

Your Content Goes HereThere is often an inherent mismatch in the risk profile

One of the key principles, when buying financial products, is to buy something that matches your risk appetite. If you’re a risk averse investor, the psychological effect of losing several hundred thousand dollars may be worse for you than for an investor who’s prepared.

This psychological reason is part of why you pay a wealth manager, such as a private banker. But it makes no sense to think risk profiles match, when you can be sold products without proper explanation. Without clear risk ratings, how can anyone tell if you’re buying something that matches your risk appetite?

And even when you’re told a product is safe, you can never be sure due to lax disclosure rules; a company doesn’t even need to provide a prospectus to sell its stocks to an accredited investor.

You know yourself whether you’re “savvy”

Even if you can achieve accredited investor status, be honest to yourself. If you know you’re not financially savvy enough, there’s no embarrassment in staying a retail investor. Neither is it right for you to assume that you’ll somehow “make less” – plenty of billionaires still stick to conventional products like investment grade bonds, or indexed funds.

Otherwise, you can use the Wizard at FinAlly.sg to compare financial products yourself. Just list your needs in the quick questionnaire, and you can browse options with no one to pressure you.

FinAlly.sg is an easy way to plan for your financial needs, without having to consult agents. You’ll save on fees and commissions, and you can easily compare between a range of different products. Get your portfolio in shape with just a few clicks of your mouse.

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Unit Trust Funds VS Endowment Plans - Which Is Right For You?

While these are the two most common options for growing wealth, many Singaporeans remain unclear about the difference. Let’s clear things up.

Most Singaporeans use either unit trust funds or endowment plans for long-term capital gains (in plain English, that just means “to have a huge pile of money” at some point in the future). While these are the two most common options for growing wealth, many Singaporeans remain unclear about the difference. Let’s clear that up:

What is a Unit Trust fund?

A mutual fund is a Collective Investment Scheme (CIS), in which many investors pool their money to buy different assets. Depending on the fund in question, these assets can be stocks, bonds, gold, property, or a mix of all of them. A unit trust fund can even hold units of other funds.

Ultimately, the point is that all the fund’s investors will see a return on investment, when the fund manages to purchase assets that generate profits.

A fund decides what to buy or sell based on the direction of its fund manager. This is sometimes a human being, and sometimes a computer algorithm (i.e. a programme that automatically buys and sells based on market movements).

In return for the expertise of the fund manager, the investors pay a cut of the profits generated. This is called the expense ratio, which is used to pay the fund manager and also the cost of running the fund (e.g. advertising and administrative work).

What is an endowment plan?

On the surface, an endowment plan is looks quite similar. A group of people pool their money, and the insurer then invests the money to give them a return on investment. The cost of the endowment plan comes from the premiums, which are charged to each investor.

A part of the premium goes toward investing in various assets, while the other part goes toward paying the insurer. This cost is often referred to as the distribution cost.

1) Endowment plans have a maturity date

Endowment plans have a maturity date, after which the investor will get a lump sum payout, and the endowment ends. Unit Trust funds don’t have a maturity date; you can stay invested for as long as you want (or as long as the fund lasts).

Most of the time, endowment plans are used to save money for a specific purpose. For example, if your child is six years old, you might purchase a 15-year endowment plan. This will give you a lump sum to pay for your child’s tertiary education, as the endowment will mature when your child reaches the age of 21.

Unit Trust funds can also be used this way, but it is more common for unit trust funds to be used to continually amass wealth, for long term goals such as retirement.

A mutual fund has a benchmark index, against which its performance is measured. For example, say a mutual fund uses the FTSE 100 as a benchmark index.

This means that, if the FTSE 100 gains three per cent, the mutual fund should also gain close to this amount. If the mutual fund were to gain 3.17 per cent, then it would have outperformed (beaten) the market. If the mutual fund were to gain only 2.96 per cent, then it would have underperformed.

Note that the same applies when the benchmark is negative. If the FTSE 100 has returns of negative two per cent, and the mutual fund delivers returns of negative 1.89 per cent, it has still outperformed the market – it didn’t lose as much as it should have.

With endowment plans, there is no benchmark index. Rather, the insurer projects a return (3.75 per cent to 4.75 per cent), and tries to deliver this return consistently. This is called an absolute return.

This means that, even if the endowment product manages to gain 12 per cent due to clever management, the investors will still only get 5.25 per cent. The excess money is retained, to ensure returns will not fall below 3.75 per cent even in bad times – this is how the endowment manages to keep returns are consistent.

3) Endowment plans include an element of protection

Most endowment plans are still insurance policies. While they may not provide the same level of coverage as a protection-oriented product, they still include features such as payouts to beneficiaries, in the event of the policy holder’s death.

Unit Trust funds are not about protection; they are purely about growing your wealth with good returns. As such, many people who rely on unit trust funds will also have to purchase term insurance.

4) Endowment plans are simpler to understand

For the lay investor, endowment plans are easier to comprehend. It’s simpler to know your returns are “around three to four per cent”, than to check the 20-year performance of your mutual fund.

Investors who seek unit trust funds need a solid understanding of how said fund works. For example, it’s important to know if a fund is well-diversified, or if the fund has sunk too much into one asset. You will also have to check its performance against the benchmark, to know you’re not buying a losing fund.

With endowment policies, you can pay less attention to these details. All you need to do is check whether the expected returns are achieved.

Which is better?

The answer depends on the investors’ intenti. If you are saving for something important in 10 years, it’s best to stick to endowments with their more predictable results. If you are looking at retirement, many mutual funds are able to deliver better returns.

Realistically, you will probably need both endowment plans and unit trust funds (although at different times in your life). You can speak to our retirement experts at RAY ALLIANCE Financial Advisers., to find the right product for you at present (http://www.rayalliance.com).

Alternatively, you can use our financial planning wizard, and get the right product yourself while earning a 50 percent rebate (http://finally.sg/why/) on agent commissions.

FinAlly.sg is the fastest and easiest way to get insured online. We help you plan for a comfortable retirement, and for future emergencies, with just a few taps on your phone screen. Even better, you can earn rebates of up to 50 percent of your agent’s commission, and up to 25 percent when you refer a friend (http://finally.sg/why/).

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Should you buy whole life insurance, or an endowment plan for your baby?

Providing for a child early in life is a good idea – over time, insurance gets more expensive; and the longer you wait, the longer your child goes (financially) unprotected. A common question at this point is whole life or endowment? Both have their pros and cons, and here’s how to pick:

What is whole life insurance?

Whole life insurance is a protection oriented financial product. That is, the intent is not so much to grow money for your child, but to provide in the event of your child’s illness, disability, and death.

With whole life insurance, you pay the premiums for a certain number of years (usually five to 20 years), after which the policy protects your child life (up to the age of 100).

Whole life insurance is always cheaper when bought at a young age. In particular, premiums for whole life insurance become much higher after your child is diagnosed with medical conditions, such as asthma or arrhythmia.

What is an endowment policy?

An endowment policy is a financial product geared toward wealth accumulation. Unlike whole life insurance, endowment policies provide only a death benefit (although you can buy riders, which increase premiums to provide other forms of coverage).

Endowment policies last for a predetermined period, typically 10 or 30 years. At the end of this period, you will receive a lump sum pay out. The amount varies based on the policy, but most endowments will grow your money at around two to four per cent per annum.

The lump sum pay-out can also be assigned to your child, but this is generally inadvisable (unless you are okay with your 20-year-old child suddenly receiving large sums of cash).

A note in payer benefits for parents:

For both whole life insurance and endowment, you can buy payer benefits. This will raise premiums slightly; however, payer benefits mean that – should you pass away – the remaining premiums on your child’s policy are waived.

This is a useful consideration for parents in high risk jobs.

Which is the correct policy to pick?

Neither policy is inherently better. Rather, it depends on what you intend for the policy to do. The key things to note are:

Endowment policies provide greater flexibility

Whole life policies lift the burden of insurance premiums

Endowment policies are better for targeted goals

Whole life plans carry an unpleasant connotation for some parents

1) Endowment policies provide greater flexibility

Because endowment policies end in a lump sum cash pay-out, they provide more flexibility. For example, say you purchase an endowment policy, to provide for your child’s university fees.

However, by the time the endowment matures, your child has decided not to pursue further education; or perhaps your child has received a scholarship, which makes the endowment money unnecessary.

In such an event, you could repurpose the money for other needs. You could use to enhance your retirement account, use it as seed money for a small business, set it aside for your child’s future wedding or house, etc.

Whole life policies are more fixed: once you’ve purchased the policy, the money can only go toward your child’s financial protection, and nothing else. If it ever becomes unnecessary (e.g. you become affluent and can more than provide for your child’s medical needs, or your child earns more than enough to buy her own insurance), then you may wish the money was around to be invested elsewhere.

2) Whole life policies lift the burden of insurance premiums

The biggest upside of whole life policies is that, once the premiums are paid, they’re no longer a worry. Even if you lose your source of income later, you’ll know that your child is protected.

Also, insured children are relieved of the need to buy insurance for themselves. As a frank reality, you don’t know how financially responsible your child will be. If it turns out they’re not good with money, and don’t have the initiative to insure themselves in future, you’ll be glad you bought them a policy. One important benefit of whole life policies is that you can add riders to provide coverage on Critial Illness for your child. This may be important because in the event of critical illness, the lump sum cash pay out may be useful for medical treatment for your child.

3) Endowment policies are better for targeted goals

If you have a specific goal in mind, such as providing for the down payment on your child’s first home, or paying for your child’s first car, then endowment policies are the way to go.

As you already know how much you’ll need, it’s easy to compare and pick the right policy.

On the other hand, if you have nothing specific to plan for, you might want to focus on protection and use a whole life policy instead.

4) Whole life plans carry an unpleasant connotation for some parents

There is one other reason some parents choose endowments, which has nothing to do with money.

Using a whole life plan seems to carry the connotation that, should your child die, you would intend to benefit from the child’s death. This carries moral and psychological connotations, that may be unpalatable to some parents.

Whichever option you pick, you need to compare premiums and pay-outs to get the best deal.

Not all insurance policies are equal. It’s possible for some policies to be more expensive, while providing only the same coverage or pay-outs. Fortunately, you don’t need to spend hours comparing between brochures.

This may the golden number to receive after retirement and while ambitious, it isn’t impossible. We’ve done up the numbers to help you grasp this challenge.

Many Singaporeans aspire to get $3,000 a month after retirement. Singapore’s median gross monthly income, as of 2016, is $4,056. So $3,000 a month represents, more or less, an income replacement level just above 70 per cent. This is ambitious, but not impossible. Here is how much you may need to invest, to get this amount:

Using the four percent rule

Before we understand how to get $3,000 a month at retirement, we need to look at a common rule of thumb.

The four percent rule is a guideline, often used to plan retirement. This guideline states that your retirement fund should last to the end of your life, if you withdraw no more than four per cent from it every year.

This is based on a study by financial adviser William Bengen in 1994, in which portfolios of stocks and bonds were studied over a 50-year period. This 50-year period was between 1926 and 1976, and were especially disruptive years (many stock market crashes and rallies happened in this time, as well as World War II).

The study concluded that, if only four per cent of the retirement fund is withdrawn every year, then the retirement fund will not fail to last at least 30 years.

As such, let’s assume that the $3,000 you get every month ($36,000 a year) will have to constitute four per cent of your total retirement fund.

Caveat:

We are aware that not every financial adviser considers the four per cent rule accurate. We have listed some contingencies below. Each person’s financial needs differ, and as such no rule of thumb can be 100 percent accurate. The four percent rule should be taken as a guideline only, and not as a fixed rule.

How much do you need at retirement then?

Assuming $36,000 a year is four per cent of your total retirement fund, you will need $900,000 in total by the time you retire. However, things get a bit more complicated due to inflation.

In 20 or 30 years, the value of $900,000 today will be much less. This is because the cost of living increases every year, as the economy grows. In Singapore, and most developed countries, you can count on the rate of inflation being about three per cent per annum.

Let’s say you are 35 years old this year, and will retire at age 65. In 30 years, the value of $900,000 today is just around $370,788*.

In order to have the same purchasing power as $900,000 today, in 30 years time, the amount you will need is actually closer to a whopping $2.18 million.

Now again, this is not exact – it will depend heavily on the make-up of your portfolio, and on the state of the economy in 30 years (which no one can predict).

*Amount / (1+inflation rate)^number years

** Amount x (1+inflation rate)^number years

Some contingencies to consider

Some assumptions are also being made regarding your portfolio. For example, it’s assumed that you will have a mix of assets that provide a constant stream of income; examples can range from perpetual income bonds to a house that you rent out.

If your assets that don’t provide any steady income (e.g. gold bars), then you will have to sell them off for money. This will mean you need even more at retirement, as your assets do not generate any income to slow the rate at which you deplete them.

Speak to a wealth manager or financial adviser for more details on what to put in your retirement portfolio, or follow us on Facebook.

How can I possibly make that much money?

It is not impossible to have $2.18 million in assets at retirement (remember, you don’t necessarily need all this in cash – renting out the flat you have, or downsizing your home, can all contribute to your retirement fund). However, it isn’t easy either – you’ll have to be a disciplined saver.

For example, if you can save 30 percent of your monthly paycheck (say you make around $4,000), and grow it at five per cent per annum, you will get just over a million dollars over 29 years. Remember that your CPF Special Account (CPF SA) already gives an absolute return of 4 percent per annum.

However, you will also need to supplement your CPF with other financial products, and even a little bit of side-income can help. There are insurance policies that can further grow your wealth (in some instances with returns as high as seven to nine per cent), as well as various funds you can consider.

Not everyone has the privilege to start saving for retirement in their 20s. Various circumstances, such as limited income or medical issues, can mean some people will only start to save and invest significant amounts in their 40s. However, it is not impossible to build a comfortable retirement, just because you had a late start.

You Are Not Alone

Starting late to save for retirement is very common. There are many people who can only start to think about retirement in their 40s, or even in their 50s. Various obstacles may have prevented them from starting earlier.

But starting late to save for your retirement is better than not starting at all. There are financial plans and products that may be able to help build a retirement fund for those who start late. The most important thing is to start as soon as possible.

Here are the key steps to take:

1) Save as much as possible to make up for the time lost

Based on your risk profile, take up the appropriate savings or investment plan and save as much as you can. This is to make up for the time you have lost and to accumulate as fast as possible to meet your retirement goal.

Another important point will be that of staying within your risk profile when investing. Do not take on risks that are above your risk appetite hoping to get higher returns. This is because plans with higher returns usually comes with higher risks. And you may lose your capital if the market goes against you.

2) Look beyond budgeting alone

Of course, the next question is “how can I save or contribute more to my retirement planning?”

The most obvious way would be to spend less. However, there is an limit to how much you can budget your spending. At some point, you will be reduced to your basic needs (food, water, and shelter), and cannot cut costs any further. There may be, however, no theoretical limit to how much more you can earn.

To illustrate this point:

Let’s say you want to contribute an extra $500 a month to your retirement fund. What happens if you try to reduce your expenses?

You could spend $20 less on transport every week, by walking under the hot sun everywhere. You could skip your favourite plate of chicken rice once a week, to save $3.50. You could avoid going out with friends, thus saving another $50 a week. We could go and on, but the quality of your lifestyle deteriorates significantly.

Instead of going through all that, you can try to grow your income. You could do someone’s accounts, help someone to polish up their sales presentations slides, help to design a website, and so forth, depending on the skills and knowledge you have. You can try to make an extra $500 through these efforts, than through making painful sacrifices whichyou are most likely to give up before the year is up.

So, for a start, adopt a mentality where your first reaction is no longer just to cut costs. When you need to get the money, focus on who will pay you to do something. You only use budgeting when there absolutely is no other way to make a few hundred extra dollars.

By the way, even a small amount like $500 makes a big difference to your retirement fund. $500 a month is $6,000 a year. Compounded at five per cent over 20 years, the the total amount is $207,550. For more on getting five per cent per annum, speak to one of our expert retirement planners at RAY ALLIANCE Financial Advisers.

3) Start working out the possibilities of downsizing, and be realistic

If you have a home, you may have to seriously consider the possibilities of downsizing. This might mean moving from a private property to a HDB unit, or moving from a five-room flat to a smaller one.

The sooner you prepare yourself mentally, and the sooner you work out the finances involved, the smoother the transition will be. Remember that, in your twilight years, a larger house can be difficult to maintain. Not only does it take more cleaning, you will pay higher conservancy charges, which can eat into your retirement fund.

Note that it is inadvisable to sell off your home and plan to move in with your children. Things may not work out, so always plan to have enough for your own home even if you downsize.

4) Revise your insurance plans, or get one if you don’t already have one

If you have an insurance plan, it’s time to review it and see if it will suffice. If you haven’t had a chance to get one, now is the time to seriously look into it. You cannot properly plan retirement goals without insurance – all it takes is a single accident, critical illness or crisis to derail your plan.

Visit FinAlly and let our online wizard work out the best assets for you. You’ll also save money this way, as you’ll receive a 50 per cent rebate on agent commissions. It’s more money for a comfortable retirement.

5) Consolidate your debts

If you have any outstanding debts – particularly credit card debts – take immediate steps to pay them down. It is impossible to out-invest credit card debt (the interest rate is around 24 per cent per annum), so it has to be paid down as quickly as possible.

Remember you can use a lower interest rate loan to pay off your more expensive ones. For example, you could take a fixed instalment loan at lower interest rates, and then use the money to pay off your credit card debt.

3 Common Pitfalls Singapore Muslims Make When Nominating Beneficiaries

3 Common Pitfalls Singapore Muslims Make When Nominating Beneficiaries

by Abdul Basheer Syed Ibrahim

In Singapore, insurance nomination works differently for the Muslim community.
When Muslims pass away, their distribution of assets (including insurance policy) follows Muslim Intestate Law (also known as Faraid Law). This is different from the Intestate Succession Act which applies to non-Muslims.

It is important for Muslims to understand how this impacts their insurance proceeds and to make their nominations accordingly. There are three common pitfalls that seem to occur and they are as follows:

1) Not Making Any Nomination

After purchasing an insurance policy, some clients did not do any nomination.

This means that the insurer is unaware of the rightful beneficiaries, when the policy owner passes on. The claim proceed will be classified under the “Deceased’s Estate”.

This is where things become complicated.

Family members need to obtain an Inheritance Certificate from the Syariah Court, which facilitates the distribution of the deceased’s estate according to Faraid law.

In an undisputed claim, insurance companies are allowed to pay up to $150,000 to the “Proper Claimant” (legally defined as the executor, spouse, parent, child, sibling, nephew or niece of the deceased).

The rest of the amount is withheld until a Grant of Probate (GoP) or Grant of Letter of Administration (GLA) is issued by the Family Justice Courts. These legal proceedings can take several months and possibly thousands of dollars in legal fees.

For example, if the deceased had $1 million in insurance coverage, the balance of $850,000 will only be paid out after the GoP or GLA are submitted.

2) Making Revocable Nominations For Minors

As Muslims are allowed to make a revocable nomination (under the Majlis Ugama Islam Singapura ruling), some chooses to nominate their young children. However, if a nominee is below 18 years, the insurer will pay the minor’s share on behalf to the parent or legal guardian who are the trustee.

The benefit of this nomination is that the policy owner retains full control / ownership of the policy and can make changes without consulting the nominees. This feature is similar to CPF nomination. So, besides your loved ones, you can also nominate your neighbour, an organisation or even your boss!

However, a revocable trust creates an exposed estate that leaves the possibility that beneficiaries will end up with nothing. So in the event of bankruptcy, the policy proceeds may be exposed to creditors.

3) Making Irrevocable (Trust) Nominations

An irrevocable nomination means the policyholder surrenders all ownership and rights of the policy. Only the spouse and/or children can be nominees. The main benefit is that the policy is ironclad protected from creditors in even of bankruptcy.

However, this is where you need to be aware of the pitfall.

Once the nomination is made, the policyholder cannot amend it without the written consent of all the nominees. For example, if the policyholder had an accident, and he becomes total and permanently disabled, he will not receive any insurance payout as the proceeds are solely for nominees.

Thus, think twice before rushing to make a irrevocable (trust) nomination so that it does not jeopardise you in the future.

Therefore, after getting an insurance policy, make sure that you nominate your beneficiaries. This does not cost you anything. There is also no reason to delay taking this important step.

I hope you found this article helpful. For more information, do drop me a note on LinkedIn.

For my next article in the pipeline, I will be looking at an important question: Can a Will Supersede Your Nomination ?

Stay updated by following RAY ALLIANCE Financial Advisers on Facebook and LinkedIn. You can also visit www.rayalliance.com for more interesting articles.

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About Abdul Basheer

He is a Certified Associate Financial Consultant (AFC) with 22 years of wide spectrum insurance industry experience. His journey in the financial arena commenced from Great Eastern Life with numerous accolades and awards.

He joined RAY ALLIANCE Financial Advisers to proffer wider choices of insurance planning and wealth management to clients.

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Financial Planning for “Singles”

By Esther Lee

When it comes to financial planning, “single” doesn’t mean unattached. Rather, it means that you are the only person providing income for yourself. People who are unmarried, divorced, single parents, or widowed can all be considered single.

Today, the number of singles in Singapore is on the rise. Modernisation, and the rise in educational levels, are two of the main contributing factors. Some choose to remain unattached as this allows them to follow lifelong pursuits of a cause or passion.

However, there are some financial considerations for singles. Being single requires greater self-sufficiency. There may be no one to help when your finances run low or to see to your financial needs in your twilight years.

Having worked with many singles over the years, I’ve identified some priorities for singles to look into.

1. Having An Emergency Fund

Unlike a married couple with working children, singles may not have anyone to fall back on during an emergency. If you get injured and are unable to work, you may be forced to take up high-interest loans to pay your bills. This may result in long term debt issues.
That’s why it’s of utmost importance that you have an emergency fund.
If you’re an employee, this fund should cover six months of expenses. If you’re self-employed, extend the size of the fund to 12 months of your income.
Your funds must be quickly accessible. Don’t place them in products like fixed deposits, where you may face penalties for early withdrawal.

2. Paying Off Your Medical Bills

Medical bills are some of the highest costs you’ll face. If you’re not well covered, a single bout of illness or one bad accident can leave you in debt for years.
Singaporeans’ basic hospitalisation needs are taken care of by MediShield Life; but this only covers hospitalisation in Class B2 or Class C wards.

Consider enhancing this with an Integrated Shield Plan (IP). This gives you the option of healthcare in a Class A and B1 ward, in government of private hospitals.

You may also need additional health insurance cover as there’s a “deductible” portion to insurance claims. This is the fixed amount that you must bear each year for your hospitalisation. On top of that, there is also a 10% co-insurance, after the deductible, that you will need to pay as well.

The approved Integrated Shield Plans payouts will only kick in after you’ve paid the deductible and co-insurance. These can be covered by additional riders to the approved Integrated Shield Plans.

3. Critical Illness Coverage

Early detection of any illness can save your life. But early detection is meaningless, if you lack the money to pay for immediate medical intervention.

If you discover a critical illness in its advanced stages, you’ll probably need drastic lifestyle changes. You may need a stay-in helper if your mobility is impaired, or you may need to cover the cost of expensive medical equipment.

As such, singles must ensure that their critical illness payout covers their debt obligations over a prolonged period. The emergency fund is just a stopgap measure.

4. Having A Disability Income

Critical illnesses are not the only thing that could affect your lifestyle. You also have to consider the impact of accidents, which stop you from working. For example, if you sustain a back injury that lasts three to six months, and if that affects your work, the condition can cause a drastic drop in your income.

Disability income insurance can provide up to 75 percent of your (averaged out) monthly income. This type of insurance will pay a monthly amount as long as you are disabled up to your stipulated retirement age. Coupled with an emergency fund, the disability plan will help to provide for your monthly expenses while you are recovering.

5. Planning for Retirement – Making Your Money Work for You

Don’t think of retirement as a specific age like 62 or 65 years old. The main point to retirement is that when you want to stop working, or just want to work less, you’ll be able to do so.
Having a guaranteed income that pays for life is important. Consider how much you want to live on every month once you’re ready to stop working.

Your passive retirement income should account for your basic needs, like food and healthcare, and for lifestyle choices that are important to you such as travelling, building a stamp collection or golfing.

Start planning as early as possible. When you know your desired passive retirement income, you have clear financial goals. You can decide how to get there with a balanced and well-diversified portfolio.

6. Managing Your Estate When You Are Around and Not Around

Having financial independence is important, but there are times you may need to depend on others. If you become incapable of managing your funds, whom do you trust to make health and financial decisions on your behalf?
Wills, lasting power of attorney, and advanced medical directives are important in this regard.
If you’re single with young children, a will lets you appoint a guardian who can care for them. Your will can state your wishes regarding asset distribution, such as allowing your children to receive their whole inheritance only when they have reached financial maturity.
Lasting Power of Attorney (LPA) lets you appoint a third party, such as a close friend, to make decisions for you when you lack the capacity.
An advanced medical directive is a legal document pertaining to your medical treatment. This compels your doctor to discontinue treatment under certain circumstances. Money allocated for your treatment can go to charities and causes you care for, or to children or friends of your choice.
These are all important considerations for singles as you may not have a family member to speak for you in such situations.
Take the above steps to be a carefree single! Live well and be free of worries!

About Esther Lee

Esther Lee has spent three decades as a successful financial adviser. She comes from a difficult background, in which she had to deal with both parents’ illnesses; Esther now uses her expertise to help others in difficult financial situations.

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